Morris was beaten on points after a tremendous bout that had the crowd on their feet throughout at the Whites Hotel in Bolton.
Flatley’s clash with Morris has immediately been referred to as a small hall thriller and fight of the year contender.
Morris, 27, from Ludlow, gave Flatley problems from his southpaw stance throughout the entire 10 hard rounds that saw the pair trading leather non-stop.
The closely-fought contest was awarded to ‘Quiet Storm’, who prevailed 98-93, 97-94 and 97-93 on the three judges’ cards.
The 24-year-old Flatley said: “I can’t give enough respect to Craig Morris for that fight. I’m champion of England and in an absolute war.
“I think a lot of people are already talking about that as a fight of the year contender on a small hall show.
“I know I’ve got a big heart. I’ve shown that in the past and I definitely showed it in that fight.”
The two were duelling for the belt last held by Morris’s BCB Promotions stable-mate Adam Harper.
Morris is a former Midlands champion at welter who previously had 11 wins from his 14 pro contests, three by TKO.